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Formation and compliance

Charitable Trust

  • Governing document is a trust deed or will
  • No protection from liability for the trustees
  • Registered as a company or an unincorporated association
  • Can have trust/ foundation/ charity in the title
  • Must work within charitable purpose and powers set out in the trust deed
  • Outside supervision from Charitable Commission only
  • Once the trust is registered it must publish a formal annual report and accounts including grants and report any significant changes to the trust
  • Regulators cannot generally tell trustees what to do provided they stay within their own rules
  • Need a charitable purpose – the type of causes the trust want to support, this can be worded very general to keep options open
  • Cannot own land or sign documents in its own name
  • Deed needs to be signed by an independent witness
  • Trust deed needs to refer to a specific amount of money or some other asset that will belong to the trust at the time the trust is executed (can be £5, £10)
  • Must meet the gross minimum annual income of £5,000 for registration (Charity Commission will not register unless there is independent evidence that this income would be achieved)
  • Does not require stamping

Unincorporated Association

  • Constitution or rules
  • Association: A group of people decided to cooperate in furthering what the organisation is set up to do (have certain parts to play in administration)
  • Unincorporated: Not a company, does not have limited liability and is not able to own land in its own name
  • If less than £5,000 annual income can use small model constitution*
  • Simplest to form and set up
  • Formal meeting to sign and date constitution by all the trustees
  • For registration, need to complete a copy of the application form and declaration and also a copy of the constitution
  • Have a membership

Company Limited by Guarantee

  • Governing document is articles of association
  • Can own land and enter into contracts in its own name
  • The charity is legally separate
  • Trustees/members have limited liability in most cases
  • The charity is subject to Company Law as well as Charity Law
  • Must register with Companies House as well as the Charities Commission
  • Most complex to form and set up
  • Has the most rules and regulations to follow

Charitable Incorporated Organisation

  • Incorporated but not a company – The charity has a separate legal personality
  • Only have to register with the Charity Commission and not Companies House
  • Can enter into contracts in its own right, its trustees have limited liability or no liability for debts
  • Simpler than establishing a charitable company but not as straightforward as running an unincorporated association or a charitable trust
  • Governing document is a constitution
  • Must register with the Charities Commission even if less than £5,000
  • Do not come into existence until they are registered
  • Must have a registered principle office
  • Must submit annual returns and accounts
  • Constitution must contain certain provisions
  • Insolvency law applies
  • Amendments to the constitution are not valid until registered
  • Have a legal restriction on the name like a company

*Small Charity Constitution

  • If less than £5,000 there is no need to register with the Charities Commission
  • If annual income goes above £5,000 must register with the Charities Commission and replace the constitution with a more comprehensive one
  • Must discuss constitution and check everyone agrees with it
  • Write in the Charitable ‘purpose’ to describe what the charity has been set up for
  • Sign and date it

Reporting Thresholds

Gross Income  Total Assets  Accounts Requirements  External reviewrequirements  Annual Returnrequirements 
 <£25,000  Accruals basis No external reviewrequired Must complete an AnnualReturn within 10 monthsof the year end
 >£25,000 but <£250,000  Accruals basis Can choose either anindependent examinationor an audit unless yourgoverning documentstipulates Must complete an Annual
Return within 10 monthsof the year end
 >£250,000 but <£500,000  <£3.26m  Accruals basis Can choose either anindependent examinationor an audit unless yourgoverning documentstipulates Must complete an AnnualReturn within 10 monthsof the year end
>£250,000 but <£500,000  >£3.26m  Accruals basis  External audit is required Must complete an AnnualReturn within 10 monthsof the year end
 >£500,000  >£3.26m  Accruals basis  External audit is required Must complete an AnnualReturn within 10 monthsof the year end
>£1m >£3.26m Accruals basis External audit is required Must complete an AnnualReturn within 10 monthsof the year end andmust also complete theSummary InformationReturn as part of theAnnual Return